Following the centre's path, Gujarat and Maharashtra also reduced fuel prices by 2.50 per litre. Both petrol and diesel were settled at Rs 88.97 a litre and Rs 81.99 a litre respectively. He said that while the Centre has cut excise duty on petrol and diesel by Rs 1.50 per litre, the Oil Marketing Companies (OMCs) will further reduce prices by Re 1 per litre.

Immediately after the announcement, and the declaration by the Finance Minister, three states have responded, and reduced the price of petrol and diesel by Rs 2.5, thereby making the overall reduction to Rs 5 per litre. 1 drop by oil marketing companies, taking the cut in fuel prices to Rs. 2.50.

Announcing the decision, Finance Minister Arun Jaitley asked the state governments to match the move with a similar reduction in sales tax or VAT.

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The state of Karnataka, who earlier slashed fuel prices by Rs 2, will not be announcing any more cuts.

The Finance Minister said, the prices of crude oil and domestic developments in the U.S. have impacted the economies across the world. "Thus petrol & diesel wd be Rs. 5 cheaper in the State of Gujarat".

Jaitley said the total impact of Rs 1.50 cut in excise duty is about Rs 21,000 crore for full year and Rs 10,500 crore the reminder of current fiscal. But growing public anger over surging fuel prices has caught the attention of the government.

The recent reduction in Value-Added Tax and excise duty is due to elections in 5 states in November-December.

"And reducing oil prices, if you say is good politics, so be it", said Mr Jaitley. Any further revenue loss, however, could widen the fiscal deficit.

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